Essilor Luxottica

Good morning and good afternoon, everybody. This is Giorgio Iannella from the IR team. Thank you for joining SRO Luxottica Interim Results Management Call. The Group Chairman and CEO Francesco Milleri, the Deputy CEO Paul Dusayan and the CFO Stefano Grassi will walk you through the business and financial highlights of the first half of the year. After their presentations, there will be a 30-minute Q&A session. If you want to make a question, please press star followed by five. We kindly ask you to limit your questions to a maximum of two. With that, I hand over to Francesco.

Welcome, everyone. I am pleased to reconnect with you to share our first half financial results and update you on our progress in MedTech and wearables. Let's begin with our long-term vision. We believe the future of glasses goes far beyond vision correction. They will become innovative, powerful, AI-enabled platforms that support human performance and healthcare at various levels. Thanks to our unique scale, capability, and global reach, we are in a position to lead this transformation. As a vertically integrated group, we are developing smart eyewear that combines vision care with digital functionalities. With access every year to over half a billion customers, we have the ability to collect a huge amount of data we are positioned to further innovate in many fields such as diagnostics, early disease detection and high health, even identifying health risks, for example in neurodegenerative and cardiovascular areas. Our ambition is to become the world's leading processor of healthcare metrics using a network of smart eyewear equipped with sensors and cameras to collect and analyze information. This is the core of our MedTech strategy and the destination of our long-term journey. Now, looking at our H1 performance, we are pleased with our revenues growth of 7.3% at constant currency, with solid momentum across both quarters. We maintain a stable adjusted operating margin year over year after our relevant investments in R&D, AI, L-data collection and hearing aids that reflect our focus on the long-term innovation. We have entered in the medtech space by acquiring high-quality companies with proprietary technologies. This includes our recent acquisition of Optegra High Clinics, a strategic move that extends our reach across the full eye care journey, with advanced diagnostics, therapies and surgeries. Optegra brings strong medical expertise and contributes to expand our offering. Pilot tests in diagnostics and surgical treatment will soon begin also in our optical retail across the world. Turning to smart glasses, we are excited to launch Oakley Neta, our fast AI glasses under this iconic sports and lifestyle brand. The new collection is about to be launched, while the 50 years anniversary limited edition is already well received by the brand fans. This sets the start of Oakley's journey in smart eyewear and there is more to come. Ray-Ban Meta continues to perform exceptionally well, with sales growing more than 200% year over year. The rollout of the live AI, including new features like the real-time translation and the wider adoption of transition and prescription lenses, are all supporting the product growth. In hearing aid glasses, Nuance Audio is rolling out successfully, now available in 10,000 doors across North America and Europe, including both optical and hearing care channels. It's receiving strong feedback for both its technology and features, as well as high prescription lens adoption, now over 80%. many exciting initiatives at work in SELOR Luxottic. A lot of opportunity ahead for our big startup company. Our ambition is to get the scale in terms of business diversification and worldwide reach to be the leading innovator in the healthcare category with smart glasses, medical devices, digital systems, big data and AI vertical healthcare specialization. As a recognition of all that, I would like to highlight that Essilor Lux Optica has been named by Time Magazine among the 100 most influential companies of 2025 in the category of innovative. It's good to see that our goals and journey fully reflect into our stakeholders' perception. With that, I hand over to Paul.

Thank you, Francesco. Hello, everyone. It is great, as always, to be with you. You have just heard from Francesco about our latest breakthrough innovation that has hit the ground. Being able to constantly deliver such disruptive technology to the market requires, in my opinion, three key dimensions. A unique ability to imagine products that push the boundaries. A very solid core business to build new categories on. And robust human and industrial capabilities. And go to market to execute our ambitions. Together with our leadership team, we are deeply focused on driving the high-paced execution of our strategy. To supporting this, we constantly adjust our organization, expanding the scope of key leaders and managers. While nurturing key internal talents, we continue to bring in new competencies. Leveraging our recent acquisition would bring to us great new skill sets. Our integrated supply chain is, as you know, a key capabilities, characteristics of the group. Just keep in mind that every year we produce more than 100 million frames and 700 million prescription answering lenses. it implies a unique set of expertise. We did continue to invest in it in the first half of the year to add capacity and flexibility, which is of paramount importance in the current environment. In May, we celebrated the official opening of our new state-of-the-art prescription laboratory in France, so-called LABEX, that is supporting our wearable and nettech ambition also. More recently, we inaugurated a manufacturing site in Laos that will become a center of excellence for the production of polycarbonate lenses. And we continue to ramp up our industrial campus, new campus, in Thailand and Mexico. All our new facilities are built to meet the highest sustainability standards. To support this roadmap, we recently inaugurated a large-scale solar farm at our Barberini site in Italy with a total power of 20 MW. Now, our performance in the first half of the year was driven by our unparalleled product and brand portfolio. Francesco already talked about our wearable category with Reban Meta and now also Oakley Meta. and you also do. But we continue to strengthen our pipeline of product to address vision care needs and meet individual style aspiration with our new well received frame collections. You have heard it before, the myopia epidemic affecting young children is one of our biggest challenges for our industry. will affect half of the world population by 2050. Ethylor Hypsotica has been leading research in this field for more than four decades, culminating in the launch of the first-generation Ethylor Steles lenses now worn by millions of children in close to 50 countries. It is supported by an amazing confirming its long-term efficacy. Leading on this success, we are now launching Essilor Celeste 2.0, which offers an even higher efficacy compared to the first version. It is being rolled out in China as we speak, with more markets to come soon. At the same time, the sight-glass vision dot technology is also making great strides in China under the Nikon and Kodak brand. Myopia management brought us closer to the doctors, and the dialogue with the scientific community has become even deeper thanks to our push into medtech, in particular with Heidelberg Engineering, widely recognized for its invaluable contribution to the research of visual disorders. The International Spectralis Symposium, held in June, is a great illustration of this. In the field of presbyopia, I am pleased to share that we continue to unlock a constant flow of innovation across brands. Vidus has just expanded its range with the PhysioExtensy which optimizes vision clarity in any light by being able to predict the pupil size variation of its wearers. Nikon has recently come out with Nikon Z, a new design focused on contrast management, while Shamir has reached great success with its Autograph progressive lenses. Transition light management. I believe we have really achieved something interesting here. It is a great example of how we take a groundbreaking technology, create a platform, and apply it transversely across our entire category range. Initially used with the prescription lenses, we expanded it to Plano, then made it a core benefit of our Reban Meta, where the penetration now goes beyond 50% in our direct-to-consumer channel. It's fueling our organic growth. Speaking about frames, in recent months, I've seen so much creativity going into our new collections, from optical to sun, from high-end to entry-level. Let's take Ray-Ban and its new cool waferer-puffer model, available in a variety of bold colors. We are also researching novel materials to be used in high-wear and have recently showcased copper-titanium-powered ultralight frame. While our Everflex material is the perfect companion for active kids, designed to handle bumps and bends. At Oakley, alongside the new Hi-Rap models, Masseter and Lateralis, we have just launched for the 50th anniversary, already 50 years, of Oakley. ellipse limited edition to celebrate the action space collaboration taking the ok technology to the moon as you can see we have such a comprehensive offer of products and brands arising from our relentless focus on innovation which combined with our unique go-to market capabilities have allowed us to keep fueling the mix and delivering a robust and balanced growth across all channels categories and geographies i am now over to stefano who will tell you more about our business and financial performance thank you over to you stefano hello everyone and welcome to the first half 2025 earnings release

We're here today to share another remarkable quarter for AstroLuxOptica. Our revenue were up 7.3% per constant currency, very much in line with the performance that we delivered during the course of the first quarter. Three out of the four regions, Union, Asia, and Latin America, they all deliver high single-digit growth in the second quarter, while North America posted a mid-single-digit growth trajectory. The contribution of the two recently acquired, Heidelberg Engineering and Supreme, accounts for about 2 percentage points, while when we look at our foreign exchange, we have some hindrance in the course of a second quarter. We have about 4 percentage points of difference between our constant and current exchange results, that is very much driven by the devaluation of the US dollar against the euro, that is about 5% during the course of a second quarter. But now, as usual, let's move to the journey across the four different regions, and let's begin with North America. We had a strong quarter in North America, 5.5% offline growth in acceleration compared to the 4.2% that we recorded in the first quarter. I would say that this result is quite strong, remarkable in a way, because the impact of the single-digit price increase that we share with you during the course of Q1 call is not really having a material impact on the second quarter. And that is very much due to the phasing during the second half of 2025. On a B2B side, the two most important channels, key accounts and independents, they all deliver positive growth during the course of the second quarter. On the ECP side, the growth was very much driven by a strong visual source alliance. And the key accounts, our key accounts were up double digits. So very pleased on that side. Conversely, the partner source and our e-commerce partners were actually negative during the course of Q2. If we look at our two product categories now, The frame business was up a high single digit, very much thanks to a strong Ray-Ban meta in North America. But I would say also that Oakley and Ray-Ban on the prescription side deliver a very strong quarter. On the luxury side, I would probably mention Miu Miu as the brand was in the spotlight in terms of growth for the quarter. The other key product category are lenses. On the land side, we were positive both single vision and progressive. We were positive on transition. And I would say the price mix was the predominant driver of our growth during Q2. If we now move to the dollar-to-consumer channel, an outstanding quarter for DTC in North America. High single-digit growth in revenue in farther acceleration versus the trend that we saw on Q1. I will probably give you two highlights on the two most important banners that we have here. Landscrafter deliver high single-digit comp sales, great execution from the Landscrafter teams, all the KPIs trended on the positive territory, whether we are looking at traffic, whether we are looking at conversion, volume, price, they were all positive. And what I can tell you already, that Q3 has started with a further acceleration to the trend that we've seen so far. The second important binary is clearly Sunglassat. Comp sales were just above 6% in acceleration compared to Q1. Ray-Ban meta was key in the growth trajectory for the Sunglassat binary in North America, and approximately 60% of the Ray-Ban meta that were dispensed in Sunglassat had transition lenses attached to it. The international allocation of Sunglass Up performed better than the domestic one, and price mix was very much the primary driver of the growth of the Sunglass Up banner. Now, let's move to the following region, North America, and after that, Europe. Europe grew 9.1% at constant currency. We have another outstanding quarter for the region, more than four years in a row of positive growth for the Europe region. And just to put our numbers in perspective here, in 2023, Europe delivered 8% growth at constant currency. In 2024, we delivered again 8% growth at constant currency. And now, in the first half of 2025, our revenue growth was 9.5% against 2024. Remarkable and impressive track record. Both professional solution and direct-to-consumer deliver an outstanding quarter, with a third consecutive quarter double-digit for direct-to-consumer and a high single-digit quarter for professional solution. All the key countries in the region were actually solid positive. Italy, Germany, Turkey, and Eastern Europe, they all delivered double-digit growth, while UK, Scandinavia, and Spain posted a high single-digit second quarter. In professional solution, our revenues were up on a high single digit with volume and price mix both on the positive side. And I would say on a frame side, Sun was very much on a spotlight. From a brand standpoint, probably a very similar picture to what we've seen and commented in North America. I would say Ray-Ban Matter continues to be very strong. And on the luxury side, I would probably mention Miu Miu and Chanel. We now move to the other product category, lenses. Price mix more important than volume, strong delivery from Varilux, great delivery from Transition. I would say no more to say for the lens product category. Direct-to-consumer now, high single-digit comps in optical, double-digit comps in sun. In the Optica Retail Banner, we have France and Germany that deliver mid-single-digit comp sales quarter, while UK and Italy posted high single-digit comps. The transition penetration on Optica Retail Banner, which is a good indication of the transformation and integration journey that we're undertaking for GrandVision, is now 90% of the photocronic lenses dispensed in GrandVision. That number last year was 75%, so material lift in our penetration of transition lenses. Another important KPI for us is represented by the subscription business model. We have subscriptions now available in 19 countries in the year. representing 22% of our revenue base, and more than 1.3 million customers so far in 2025 have enrolled in the subscription program after by our optical retail partners. On the some part of our business, I would say the sun definitely shined in the EMEA region. We were double digit in Spain, we were double digit in France, we were double digit in Turkey, and a high single digit growth in UK. Volume was very much positive across pretty much all the key banners in Europe. And I would give you further highlights here. If we look at our top 20 sun doors in Europe, the one that represents approximately 15% of our revenue base, we deliver a 20% growth year over year. Now we finished up with Europe. Let me move east to Asia Pacific. 8% growth at constant currency. It was a good quarter for Asia-Pacific, low single-digit in professional solution, double-digit growth on a direct-to-consumer channel. Let me give you a couple of highlights for this region. From a country standpoint, Japan and Korea delivered double-digit growth. India and Southeast Asia were in the mid-single-digit territory, while China and Australia delivered a low single-digit quarter for Q2. The main country, China, I would say that the myopia solution continued to grow on a strong pace. We were high single digit for the second quarter. Now, there is a lot of excitement in China, very much due to the upcoming launch of Stellis 2.0. There will be progressive rollout during the course of the third quarter across the different clinics, independent channels. and widespread in China and progressively in other parts of the Asian region. A last touch on direct-to-consumer with optical comms sales that were flat in Australia, and that was very much due to a very strong base last year in Australia, while China was up high single-digit comms. Under some parts of our business, we deliver a high single-digit quarter that was very much driven by a positive momentum in SunGlassCat Australia and a positive momentum in our greater China business. They were both up on the double-digit pace. Now, the last region on the pie is represented by Latin America. And I should mention here another outstanding track record. four and a half years of consecutive growth in the region. This is clearly indicating that the premiumization journey that AstroLuxottica is undertaking in the region for both lenses, for frames, for instruments, is all going on the right direction. Both channels grew approximately 8% in the course of the second quarter. If we look at our B2B professional solution, frames were up double-digit, and I should probably highlight here the successful rollout of Ray-Ban method in Mexico. Another critical brand for us is Oakley. Oakley will continue to be strong in the region, while on the lens side, I would say probably mid-single-digit growth in Viralux, high single-digit growth on single-vision eyes and lenses. A last touch on direct-to-consumer here for the region. Sun retail banners were strong. We were double-digit with Sunglass Up and Solaris banner in Mexico and Sunglass Up in Andes. So we were strong overall on the Sun part. Optical business was up mid-single-digit, I would say thanks to GMO, Optical Center in Guatemala, and Grand Vision banner both in Mexico and in the Andes region. The growth was very much driven by volume, but also by the price mix as a result of the premiumization efforts that we are undertaking on the region. Now, we have completed the journey across the four different regions. Let me walk you through the profits and losses for the first half of 2025. As usual, I won't comment top line, but I want to share with you that we are particularly pleased with our delivery in the first half of the year. So this first half of the year happened despite material inflationary headwinds that are still present, despite the volatility related to the U.S. tariffs. And with all of that considered, we were able to hold the margin for the first six months of 2025. When we look at our gross margin, we have about 80 basis point dilution, a constant currency, which became 90 basis points at current exchange rate. On the gross margin side, I would say that the main impact is represented by tariffs that heavily marked our profit and loss, in particular in the second quarter, but also we were impacted by the dilution related to radar matter that posted an exponential growth during the first half of 2025. The combined effect of those two items I would say is in excess of 100 basis points. But we were able to offset those headwinds, at least partially, with a positive price mix effect, with a positive management of product innovation and pricing. When we look at our OPEX, I would say good management of our operating expenditures. As a percentage of revenue, OPEX were down 70 basis points, lower than last year. Our G&A were kept well under control, and that allowed us to execute the strategic investment on the key initiatives that we are undertaking in 2025, supporting on one side the exponential growth of Rayburn Meta, and on the other side, progressively rolling out Nuance across U.S. and the EMEA countries. That leads overall to an operating margin that is flat year over year and 20 basis point dilutive occurring change rate. When we look at our results below the operating profit, I would say that we have an increase of cost of debt, although if we just look at our net debt in percentage, that is about 1 percentage point. So we are happy with that. And from a tax rate standpoint, we have just a slight increase year over year. That leads to a total net income that is down 10 basis points at constant currency and 30 basis points at current exchange rate. Now, the last chapter of our journey here is represented by a free cash flow. I will give you one number, $951 million for the first six months of the year for free cash flow generation. That's clearly a strong delivery, very much aligned with last year figures, despite a major negative impact from tariffs and also a negative impact from foreign exchange with capital expenditures that were actually higher than 2024. So let me say that if we will look at our cash flow on a life-for-life basis, you will be looking at something that exceeds $1 billion. And that clearly should reassure all of you about the strength and the solidity of our financial structure. But now let me hand it over to the operator for the usual Q&A session. Thank you.

Ladies and gentlemen, we will now start the Q&A session. Our first question comes from Chialla Battistini, J.P. Morgan. Please go ahead.

Hello. Thank you for taking my questions. The first one is on Oakley, Oakley Meta. I was wondering if you could share with us a bit of color on how to think about the ramp-up in terms of volumes, both in terms of availability of volumes as well as how you're thinking about the distribution rollout between retail and wholesales. That's the first question. And then the second question on the tariffs, now that we have a bit better clarity, a little bit, I was wondering if you could update us on the actions you see to offset some of these pressures between supply chain and possibly also some more pricing options in the U.S. Thank you.

Good afternoon to everybody. I take the first question. We have a great expectation for this Oakley Meta. It is an outstanding new platform with really better performance compared to the actual one. Battery will last longer, better camera and wonderful shape and look. We will open the distribution mostly in the same country where Ray-Ban Meta is already distributed. So we expect a very fast ramp up and we believe that it can match the number of Ray-Ban Meta. And it's not the only one product that we have in pipeline, as we said in my introduction, Something very exciting to come is waiting as we come later. Thank you.

Okay. Good afternoon, Chiara. I'll take the answer to your second question regarding tariffs. So we touched a bit during our Q1 call, if you recall. There are really two things on which we are working on right now. On one side, the diversification of our supply chain. If you remember what I shared with you last time, we have a clear, well-defined objective for Astrolux Optica. Manufacture and distribute our products in the most efficient location without compromising quality and service level. Diversification gives us different optionalities that we're leveraging depending on where it makes sense. And that's obviously extremely important. The footprint of this company is way more diversified than four or five years ago. As I mentioned, the strategic investment that we had in Thailand, we had in Mexico, we had in France, gave those optionalities that are very important for us to ensure quality and service level to the client and the consumer that we serve every day. The second important aspect to this is price adjustment. We took to execution the single-digit price increase. You don't see much in the second quarter in the US and remember that was a price increase across product categories. You don't see much in the second quarter. The vast majority of these inputs will be seen during the second half of the year. So those are the two fundamental pillars on which we're moving forward to mitigate the impact of those tariffs.

Our next question comes from Oriana Cavani, Indesa, San Paolo. Please go ahead.

Good evening. Thank you for taking my two questions. The first question is about the growth trend of the quarter and current rate. How was the growth progression over the quarter, and what are you observing in July across each region and for the group as a whole? And the second question is on the revenue growth profile in the second quarter, can you quantify the volume effect and the price mix effect, and which was more significant, the price or the mix? Thank you.

Good afternoon, Arianna. So let me give you a little update on current trading. July started well. We're very happy with the trend that we've seen. The two most important regions started at a very solid pace. I would say we're very pleased with the trend that we've seen so far. Some of them are in further acceleration. I mentioned before landscrafters. I would say also optical retail in Europe. In general, there is an acceleration in the trajectory that we've seen for the month of July on an organic basis, and that's obviously extremely pleasing. With respect to volume and price makes, I think the dynamics are a bit different depending on which region, which product category you're looking at. In general, we see probably price mix being more predominant in North America on a B2B side. I would say Europe, for example, for lenses we have a more balanced dynamic between volume and price mix. But again, when we look at our retail volume, it's very strong. We're very pleased with the volume dynamic, especially in optical retail banners in North America, as well as in Europe. So, to answer your question, generally, probably price makes a bit stronger, because product It's driving and helping us to drive in the right direction that variable, but at the same time, we have pockets of volume growth that are clearly very pleasing for us.

Our next question comes from Louise Singlehurst, Goldman Sachs. Please go ahead.

Hi, good evening, everyone. Thanks for taking my questions. You must be absolutely delighted. There's clearly a lot going on in the business, but if I could ask you two questions. Firstly, if we just talk about the improvement in North America in the professional solutions, obviously that kind of flattish to low single-digit growth, and really with the view of how we should think about that going to the second half just to manage expectations. And then secondly, I wondered if we could just talk about the growth in DTC, if you can give us the growth mix perhaps between the organic, particularly on the wearables and the acquisitions. That would be fantastic. Thank you.

Okay, this is Paul. Good afternoon. So I will take the first question on the North American professional solution. I think it's a combination of a few very focused actions that our teams are doing there. First one is we have a very good performance with the key account, with the large retail customers that we have, and that has been going on. They are leveraging our supply chain, our portfolio of products, the whole solution, the supply chain solution. But at the same time, we have a big focus on the independent channel, as you know, with one part of this independent channel being regrouped in the so-called doctor-reliant vision source, which is really outperforming the market with the quality of the consumer experience that they render in their 3,000 practices. And that is a really key pillar of our independent channel position. In the side of that, we are reinforcing all of the program to the independent channel, leveraging the laboratory network that we have in the U.S. on which we have a focus to really leverage the service and the proximity service plus the platform of products that we are launching with the new Varilux Expansi, the further penetration of transition, So we have a good activity focus on this channel, and you have seen in this quarter the progressive acceleration of this segment of our activity. So this is what I think should be a few key ideas when you think about the improvement, the acceleration that we see on PS in the U.S.

I take a part of the second, our growth in direct-to-consumer. So far, I believe that most part come from organic growth. There is pieces of meta inside and the latest acquisition of Supreme. But what make us quite happy that the high speed of growth of direct-to-consumer, so our retail e-commerce usually anticipate the trend that we see some months later in the professional solution in the wholesale because we are faster in the execution because it is all inside of the company. So what we believe that as our sell-out is growing very well, of course, there is a big push of innovation. It's not just meta, but also in our industry. Tor Nuance is giving a little help and others new product and the new collection are really also in the traditional business with the new brands are doing very well. And we believe that we will see the same growth also on wholesale in the next semester. Thank you.

The next question comes from Julian Dumas. Jeffrey, please go ahead.

Hi, good afternoon, Francesco, Paul, and Stefano. Thanks for taking my questions and congratulations on the recent performance in H1. I have two questions. One relates to Meta and in light of the tremendous success that you guys are having with Reban Meta. I was just wondering whether you have a plan to actually further raise the capacity extension you announced after the full results. I think you said you should be able to produce 10 million pairs by the end of 2026. So I was wondering whether this very strong H1 performance is changing your mind in any way on this side. And other than the side, also a question we get from investors usually is whether Meta is participating to the CapEx on the expansion program. And my second question relates to nuance. I was just wondering what the KPIs will be for you going forward on the products, maybe in the next six months or next 12 months, and whether we should expect some announcements from traditional geology networks or maybe third-party optical networks starting to partner with you and make official announcements of making nuance available on their doors.

to the first META plan to raise our capacity. The plan is in full execution. Honestly, the META plan that will really produce Oakley and Rivan and maybe new product in the future is going in the right direction. And we really, with some positive view, we believe that at a certain point we will also have the necessity to increase this capacity above the 10 million pieces that we expected now.

Good afternoon, Julian. Nuance, if I understood well your questions, clearly we're looking at a variety of different metrics. On one side, it's very important to see the penetration of prescription business within Nuance, and that's obviously pretty high. I think we're looking at something in excess of 80%. with peace in certain countries are even higher than that. So it is a platform, as we said many times, to deliver a better ideology of service for consumers. It is a platform to help people to see better every day. That's obviously extremely important. The other, I believe, critical KPI for us is obviously the productivity that we look at on our own retail network and we look at also on the B2B side. So, again, there is a variety of metrics. I should say that probably out of the 10,000 doors that we have open right now, the positive thing is that it's pretty balanced between B2B and direct-to-consumer doors. So, we have... Pretty good indication of what's going on on both sides of our commercial proposition.

Our next question comes from Velonica Dubiova, City. Please go ahead.

Hi. Good evening, Francesca, Paul, Stefano, and Giorgio. Thank you so much for taking my questions, and congratulations on a very impressive set of results. I will keep it to two, please. My first question is on the second generation of Stellis. And, Paul, if you could maybe talk to some of the differentiation that we'll see there and maybe also just confirm that you are still on track for FDA approval for the first generation by the end of the year. And maybe if you have any updates to share there, that would be much appreciated. Okay. And then my second question is for Stefano, just thinking through the moving pieces in terms of margins in the back half of the year, just wondering if you could talk through how you think about the benefit of the price increases versus the tariff headwinds. Obviously, both of them will sit there for the entirety of the period. And maybe sort of at this point in time, if you feel the probability that margins are as poor down in the back half of the year, given the moving parts that you see. Thank you so much, guys.

Yeah, this is Paul. I will take the first question. When you think about the multi-management, I would like you to think in two ways. First, that we are working constantly to improve the two platforms that we have put at work, the micro lens. technology platform, and the DOT technology, which is a diffraction technology, both showing great efficiency. So what we have done with the second generation of stellettes is we have worked, our research team, on optimizing the micro-lens, and we have found by giving them a different geography, a bit more power, a bit more asperity. that you actually increase significantly those flowing down. And we have right now just one year data that this is very, very promising. So we just launched it in China, as we talked. and we will then roll it out to Europe. The second idea I want to do with you is that we are really looking at myopia management, building a status platform, and that is what we are putting in China in place, including status frames, status variables, a full suite of solutions, including the data management, and I would like you to think this way. In regards to the FDA for STELEST-1, which is the product that we are fighting for, we are in line and having very good progress with the FDA. We are targeting by the end of this year, early next year, like I have always told you, and that seems to be going in the right direction, but you always have to be very low profile, just work with the FDA, and we are quite confident.

Veronica, good afternoon. I'll take the second question on margin H2. So when I look at tariff effects, right, I mean, we're clearly going to feel them in the second half of the year. Hopefully we have now a more feeble and crystallized feature for the remainder part of 2025. But really the way we think about it is not just about pricing. It's really taking into action the two pillars that I described to you before. On one side, all the supply chain management, manufacturing and distribution in the most efficient location, which clearly is already giving us some benefits that we see in the profits and losses at the gross margin level. On the other side, there's clearly the pricing action that we are taking just in the U.S., cross-product category, single-digit targets. I think those two combinations are pretty powerful. Mixed management will help us in the second half of the year. Dallas 2.0 to post points will be an important asset that we will add in our growth trajectory. I believe, I believe that we will take Nuance at scale, and at scale it means, you know, a larger number of doors, upscaled means an enlargement of the product category. So there's a lot of things that will come into play during the second half of the year that will help our gross margin. Then I think we look at a gross margin, but we cannot underestimate the work that has been done on the OPEX side. Our OPEX were down 70 basis points year over year. That tells you that we can take actions and become more efficient in our cost structure, still investing in what is critical for the future growth of the company. This is really the recipe of what we put in place also for the second half of this year.

Our next question comes from Luca Soca. First thing, please go ahead.

Thank you. Good evening. A couple of specific questions. When it comes to nuance and hearing aids, have you fine-tuned already your customer recruitment process? Are you relying on sales associates to try and sell the product to people walking in? Or, like I think you did in Italy, are you going to advertise the product more directly so as to generate some kind of pool effect? When it comes to Stellis, I wonder if you have an update on how the pickup is proceeding in Europe as a proportion of the success you had in China. I understand that Stellis has been a very important tool for you to penetrate the Chinese market. I wonder how important it has become relative to that in the European market. Thank you.

I'll try to answer to the first question. Nuance is a brand new platform that is much more complex than really can appear at the first glance. You have to combine the capability to advise on hearing aids. At the same time, 80, 90% of our Nuance users need a correction and so they need prescription lenses. So we have really to coordinate two different industry and really to deliver a complete pair that is not easy really to explain and to execute. We believe that in the second half of the year and much more next year, we will push on the communication from TV and any other media really to establish this new category of product and really explain how it works. how it can be used because it's really the purpose is so relevant on the Nuance product because you have this combination of correction of site and the hearing aids part. We also plan to have a full assortment and so we wait to have a bigger assortment of product with different level of price and different level of performance. At that time when the machine will run perfectly, so that is the right time to spend money to advertise and to establish this new category. also because we are the only one into the market. So there is no one that they can help us in this adventure. And this is what makes the rollout quite tough at the beginning. But we see the same trend that we saw on the Meta when we launched the story, Ray-Ban story at the beginning. It was something really very difficult to communicate and also was difficult from the customer's point uh to understand how to use it now it seems very easy everybody are just getting in the store ask for the aie glasses uh reba meta oakley meta now is uh already we have a customer that are coming in the store and that and they're asking and and this seems to be the easiest uh product to sell Nuance is in the first stage, but it's very promising, different pricing, very higher than the metaproduct. And so also for this penetration, it will be more difficult. But we are very satisfied. We are over the expectation, and we believe that with the next generation of product, we achieve wonderful results.

So on STS, Luca, first China, I remind all of us that we started several years ago deploying the new technology platform, the Myopia Management, so-called, with STS, when in Europe we started two and a half years ago, starting in France. And on top of that, in China, you have a very major pandemic issue for children, which fortunately is not as dramatic in Europe. So China, as you have heard say, its myopia solution in China in the first half is 25% of the total activity. So it's very significant. The penetration of the STELES solution, which is leading, is quite high with the Chinese children. In Europe, in certain countries, we start to have a nice penetration, but of course it's part of the full solution that we propose to the ophthalmologists, to the opticians, as part of the full vision care program that we offer alongside all of the other programs. It is not going to represent the fear of sales as you see in China. But it is very important to have it in MEA. We see it nicely accelerating in key countries. And Stellate is leading the market. It's a great platform. So this is where we are at this point. And, of course, preparing, like I said earlier, the U.S. for next year or later this year.

The next question comes from Hugo Sovez, BNP Paliba Exxon. Please go ahead.

Hi, hello. Good afternoon. Thank you for taking my questions and congrats on the results. Two, please. First, it seems that you guys are getting some volume leverage on a sell-less solution on smart glasses. Can you maybe expand a bit on the profitability of the smart glasses category as a whole in the context of very strong demand and also lower China tariff? Second, on B2B channel in North America, can you expand a bit maybe on the Varilux launch? Do you expect it and its momentum to further help for the recovery across non-partners into Q3 already, or will it be a bit more of a gradual launch? Thank you.

Good afternoon, Hugo. I'll take the first question and then I think Paul will give you a bit more color on the B2B North America. So the growth, the exponential growth that we actually see on wearable is obviously very important. As I mentioned last time, every time we are getting progressively better on a product that we said is margin dilutive from the beginning. Do not forget that on wearables we have a high penetration of transition lenses. Do not forget that on wearables we have the prescription option that is very successful, and that clearly creates additional pockets of revenue and profitability that we should account for, and obviously very potent on a go-forward basis. Paul, I don't know if you want to give a bit more color on the B2B North America.

Sure. Now, the VariLux launch, VariLux Extensive, which is replacing Physio, is a very important launch, and I'm glad you pointed it to go. As you remember, two years ago, we launched a very innovative VariLux XR at the top of the range with the personalization, so-called track, and deploy measuring device in the independent practice to really make it a full experience, including the personalization. But it was important that we follow up with also launching beneath Viralux XR, this new platform, the replacement of physio. And this is what this Viralux XR is, including the personalization also aspect. And so it's really part of this overall dynamic in this core category, which is the progressive lens, this core brand, which is Viralux, really leverage it. in all of our relations with the independent practice. So just sell it as a continuum of what we do. In parallel to that, we have also great innovation in the progressive portfolio, leveraging the Shamir autograph design, which is also doing very well in the U.S. So this is a category which is really a key focus for the team and for the labs.

The last question comes from Domenico Chilotti, Equita. Please go ahead.

Good afternoon. The first question is on the smart glasses pace. So if you think you can keep the pace that we have seen in the first semester also in going forward, or at least in the second half, given also the contribution of Oakley. And the second on the I'm not sure I got the dilution that you had from the tariff in the first half, and should I expect this dilution to decline over the second half, thanks to price mix? Just a follow-up on the previous question.

Meta, the growth of the category AI glasses, with Oakley, with Ray-Ban, and maybe with some other brands. We don't expect to keep the same pace. We expect to accelerate as we already see right now. Our forecast is really higher than before. And really, we are expanding capability. And on top of the 10 million pieces that we already plan in China, we are really adapting some others plant in especially in Thailand. to supply this kind of products. So we believe that it will represent a relevant part of our growth. And also I would like really to comment on this dilution. Now dilution seems to be a bad word, but honestly what I care is about the money that I can make. and the earning per share that I can really give to my shareholders. And Meta, also with less margin, is making a lot of money. And since the volumes are growing very, very fast, that will help the company really for the future investment and also for our journey in the medtech.

So I take the second question, Domenico, tariff dilution. So just to make it simple, Domenico, H1 tariff headwinds, very much Q2 impact. Second half of the year is going to be a Q3 and Q4 impact. Very simple. But the actions, the mitigants that we are undertaking have a, So far, a very marginal impact in the first half of the year. I mentioned pricing. And I will also say the supply chain diversification. You could expect a much broader impact from those actions during the second half of the year. So the offset that I mentioned before will take a greater magnitude of positive impact in the second half of the year. And it will obviously help to offset the impact of those tariffs.

So we close the call. We thank everybody to follow us for the questions, for the comments that will help our company to really go ahead stronger and with better results. Thanks a lot. See you next time. Thank you.